Oil Services Company Preparing Second Bankruptcy in Past Nine Months
Things have become so bad across the oil industry in 2016 that one company in the drilling services sector is preparing to file a second bankruptcy in the past nine months.
Hercules Offshore filed last August for Chapter 11 bankruptcy protection, as the plunge in the price of gas and oil has sent a rippling effect of financial stress through the world of gas and oil.
The company that specializes in oil services emerged from a bankruptcy as a healthier company last November after it shed over $1.2 billion of its debt. However, then another wave of turmoil hit the industry as crude plummeted to lows of 13 years this past February.
Because of that, Hercules Offshore announced Friday it is planning to again file bankruptcy in its effort to sell its assets. Shares of the company based in Houston, Texas plunged by 39% when the news was released.
Hercules announced it would file the motions with the bankruptcy court to allow it to continue paying its suppliers and maintain its employees’ wages as well as benefits.
Once the filing is official, Hercules would be the only oil company during the present downturn in prices to become what has been dubbed a “Chapter 22,” by filing Chapter 11 bankruptcy twice.
Hercules announced that since it had emerged from its bankruptcy this past November, the renewed drop in prices of oil and the consolidation of its customers in the U.S. hurt the demand for its services that include operating rigs and boats to help companies in the gas and oil industry.
One analyst said that debt can be stripped away, but that does not make its cash flow positive all of a sudden, particularly when the prices of oil continue to be low.
It is a sign of the chaos financially that is rocking the oil industry of late, even as the prices of oil have bounced back off their low in February of just over $26 per barrel this week to $50 per barrel.
Over 60 oilfield services businesses in North America including Hercules filed bankruptcy since the beginning of 2015. That is over and above 77 producers of gas and oil that have gone bust as well.
In this filing, instead of just restructuring its debt, Hercules will use the process to sell assets off.
The company’s assets overseas are not a part of its bankruptcy filing, but are going to be in the sale.